Reinsurers have maintained strict underwriting criteria despite improved appetite for catastrophe risks, according to an AM Best report.

The ratings agency says renewals this year have been smoother than last year, due to “better management” of ceding insurers’ expectations rather than reduced demand.

“Nonetheless, underwriting discipline, strict terms and conditions, and emphasis on client selection are being maintained,” the report says.

In the Australia and New Zealand region, “as catastrophe losses became more frequent, reinsurers moved away from the lower [excess of loss] layers during the 2023 renewals ... At this level, risk-return dynamics become more palatable, as demonstrated by the favourable results of the past year, resulting in capacity becoming more readily available in 2024.”

Reinsurers still have the upper hand in renewal talks, AM Best says.

“Despite reinsurers’ greater willingness to deploy capacity, this has not yet reverted to a buyers’ market.

“Favourable reinsurance market conditions provide the foundation for reinsurers to dictate terms.”

The report says contract terms tightened in the 2022-23 renewal season and have been maintained this year.

Reinsurers are acutely aware of the challenges posed by the changing climate and AM Best expects the sector will maintain a vigilant approach to risk assessment and pricing.

Globally, reinsurance demand for all types of risk including cyber is expected to remain strong, the report says.

“AM Best believes that, although not all risks are insurable, the global reinsurance segment faces a golden opportunity to maintain its critical role in the broader economy. Whether as a risk carrier, provider of services related to risk management, or developer of alternative solutions, the segment is in a strategic spot to leverage its knowledge and experience.”

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